NAIROBI: The Kenyan shilling dipped against the dollar on Thursday as banks bought the US currency ahead of a Monetary Policy Committee meeting which is widely expected to cut the bank's benchmark rate later in the day.
At 0718 GMT, commercial banks quoted the shilling at 84.20/40 per dollar, 0.5 percent weaker than Wednesday's close of 83.80/84.00.
"The shilling is off on interbank realignment ahead of the decision in the afternoon," said Raphael Owino, a senior trader at Commercial Bank of Africa.
"If (a cut) comes, it will be a very tepid one to incorporate some caution on policymakers side. The shilling might not fall as fast either."
Most analysts expect the central bank to cut its key rate after holding steady for six month. A lower inflation reading for June and slower economic growth in the first quarter if 2012 raised prospects of a cut in borrowing costs.
The central bank has maintained a hawkish monetary stance this year, actively intervening to mop up excess liquidity and sell hard currencies directly to commercial banks, which has supported the shilling.
The bank raised rates by 11 percentage points in the final quarter of 2011 to 18 percent to counter surging inflation and to prop up the shilling.
"If the central bank eases, the shilling will come under some pressure from importers, but if they remain hawkish, the shilling will maintain the status quo," said a trader at one commercial bank.
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